The subjective well-being of people in informal employment: empirical evidence from Mexico

Purpose - The purpose of this paper is to use a subjective well-being approach to address a long-standing debate on informal employment: whether it is a low-quality or a high-quality option. The literature generally refers to these options as exclusion vs exit. Policy makers often assume that informal employment constitutes a low-quality option. Design/methodology/approach - The paper relies on a mid-size survey from Mexico as well as on a group of subjective well-being indicators to explore whether people in informal employment display lower or higher well-being. Information on life satisfaction, job satisfaction, and satisfaction with some job-related attributes, satisfaction in other domains of life, and experiences of well-being is used to assess the situation of those in informal employment. Findings - The empirical research finds that there are substantial differences in the socio-demographic and economic characteristics of those in formal and in informal employment. These differences in the population characteristics partially explain differences in subjective wellbeing. However, once these differences are taken into consideration there is little difference in subjective well-being between informal workers and formal ones. Hence, the paper concludes that in comparison with people in formal employment, informal employment is neither associated with a better life nor with a worse life. Neither the exclusion nor the exit view of informality is supported by the empirical evidence. Practical implications - Contrary to common perceptions, informal employment does not constitute a low-quality option in the subjective well-being arena. This is a powerful message for policy makers who wish to maximize the employment-related well-being of its citizens. There may well be legitimate policy reasons why the degree of informality should be reduced. However, based on the findings in the Mexican context, the paper stipulates that reducing informal employment primarily on the grounds of greater general unhappiness is not one of them. Originality/value - The paper contributes to the relevant literature by studying informality from a subjective well-being perspective, which extends much beyond job satisfaction. No research on informal employment has previously used such a large set of subjective well-being indicators comprising variables such as life satisfaction, satisfaction in domains of life, and experiences of well-being.